We are economists writing about economics: Karl Smith, an assistant professor of economics and government at the School of Government at the University of North Carolina; and Adam Ozimek, an associate at an economics consulting firm. As most in our profession are eager to tell you, economics includes just about everything, so we'll be blogging -- with varying degrees of success -- about the economy, markets, politics, science, technology, philosophy and culture. We both come from a similarly vague libertarian ideological perspective, but we've been called neoliberal as well, and idiosyncratic might be the best adjective to use.

Krugman on Being Dovish: Social Security and Climate Editions

Paul gives an essentially full-throated endorsement of the dovish position on Social Security. As always the crux is that uncertainty militates against decisive action:

So the threat, if you like, is that future benefits will fall short of what people now expect. To avert this threat, the usual suspects insist that we must gradually reduce the program’s generosity. That is, in order to guard against cuts in future benefits we must … cut future benefits. Huh?

OK, there are some arguments you could make; maybe the adjustment would be smoother, with less of a “cliff” when the trust fund runs out, if we set benefits on a downward glide path. But that’s a second-order issue, literally: we aren’t talking about preserving the overall level of benefits, we’re just talking about reducing its variance around a smooth trend. And given how uncertain we are about what the world will look like in 25 years, preemptively cutting right now could mean a gratuitous sacrifice of future benefits that may eventually turn out to have been affordable after all.

The point is that there’s a pretty good case for letting the future of entitlements take care of itself.

However, the parallels to climate change run deeper than Paul thinks. He writes:

Why not just assume that when climate change becomes undeniable, we’ll do whatever is necessary?

The answer, first and foremost, is that each year we fail to act has more or less irreversible physical consequences. We’re pumping around 35 billion tons of carbon dioxide into the atmosphere annually; this stuff will stick around for a very long time, and its consequences for warming and sea level rise will last even longer. So each year that we fail to act has a direct physical impact on the future.

There’s also an investment aspect: each year that we fail to get the incentives right, people commit limited resources to the wrong technologies, especially coal-fired power plants instead of wind, solar, conservation, whatever. Again, these choices have a physical impact on the world of the future.

So, lots of folks may bristle at the way I put this but I am sure Paul will get it.

Putting carbon into the atmosphere is not itself a problem. Indeed, a warmer planet and higher sea levels are not in and of themselves a problem.

The problem is that people have set up their lives based on the climate that exists now, and has existed for the last several hundred years. As things change people will have to adjust.

However, its far from clear that the baseline state of the world would be worse.

So we are still talking about lowering adjustment costs.

You can see this by examining my widely mocked suggestion that mass migration could be the answer as tropical areas become intolerably hot but sub-artic areas become tolerably warm.

(I don’t dispute the idea that some of the earth would become a hellscape as things get hotter. What folks seem to ignore is the enormous amount of the earth that is currently a hellscape because its so cold. I am inclined to attribute this to an endowment effect, but I am open to the idea that there is a more fundamental asymmetry here.)

Mass Migration seems incredibly costly and the idea of climate refugees plays a crucial role in more sophisticated estimates of the cost of climate change. Yet, these potential migrants are the exact same people – inhabitants of the tropics – that Mike Clemens is talking about when he refers to Trillion Dollars bills on the sidewalk.

And, how do we pick up these Trillion Dollar bills? We encourage mass migration!

You can’t count having to do something as a cost if you are already doing a radically suboptimal amount of it.

This is the most obvious example, but more abound. Trying to upgrade legacy infrastructure is a problem in all established cities. However, coordinating a move to a new city organized around current technology is problematic as well. Suboptimal turnover means that the costs of erecting new cities is less than it seems.

To the extent we can agree that climate change is problematic largely because of the change part, makes the Social Security problem and the climate problem broadly similar.

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